Welcome and thank you for joining the Publicis Groupe third quarter 2025 revenue presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing Star and 1 at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing Star and 0 on their telephone. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead, sir.
Thank you, Sherry. Bonjour and welcome to Publicis Groupe Q3 2025 revenue call. I am Arthur Sadoun and I'm here in Paris with our CFO Loris Nold. Jean-Michel Bonamy is also here and will be available to take your question offline after this session. I will begin by sharing the highlights of our Q3 performance and the outlook for the rest of the year. Loris will then get you into the detail of our numbers before I take you through how AI is making us win today and why it will be a strong driver of our goals tomorrow. As usual, Loris and I will take all of your questions after the presentation. Before we start, please take the time to read the disclaimer which is.
An important legal matter.
Okay, let's begin with the three key highlights from our Q3 performance. First, we delivered another very strong quarter with net organic growth of +5.7% in Q3, building on a strong H1 at +5.4%. Second, we are raising our full year net organic revenue growth guidance to a range of 5% to 5.5%, up from our initial 4% to 5% on the strength of ongoing client demand, particularly for AI-enabled products. Third, we are already having good visibility going into 2026 thanks to a record first half performance in new business and a continued strong momentum over the summer. Let's dive into the detail of these highlights. Starting with organic growth at +5.7% in Q3, our performance was even stronger than the +5.4% achieved in H1, confirming our ability to maintain our growth momentum once again this quarter.
Our results were driven by scope expansion with our clients, sustained strong new business momentum, and a competitive landscape that is increasingly favorable to us. Looking at our business practices, connected media, representing circa 60% of our total net revenue, was once again very strong, posting high single-digit growth this quarter driven by Publicis Media scale across geographies and channels and powered by Epsilon data. Intelligent creativity, generating circa 25% of net revenue, recorded mid single-digit growth. Unlike market trends which are negative, this performance was supported by significant growth in production and creative wins. Lastly, technology with Publicis Sapient representing 15% of our net revenue stayed in positive territory despite the IT consultancies market remaining soft as recently reported by the leader of the industry.
Although clients are yet to embark in their large-scale AI transformation programs, we are seeing growing engagement on AI consulting projects for them to build their own agentic network. When it comes to our result by geography, all of our key regions performed well. The U.S., representing 59% of our net revenue in Q3, achieved outstanding organic growth at +7.1% this quarter and accelerating versus H1 where all of our practices have been contributing. Europe reported +2.8% organic growth against a particularly high comparable in Q3 2024 that included revenue from the Paris Olympics. Asia Pacific was again very strong at 6.5%, with China up 6.1% in Q3 driven by market share gains. Turning to our second highlight, our guidance upgrade in July on the back of an exceptional first half in new business wins, we had already increased our guidance to close to 5%.
Today we are raising it further to a range of 5% to 5.5%. As you may recall from Q2, we had included some potential contingencies into our raised outlook. However, in Q3 none of them materialized. In fact, we did not see any slowdown. Marketing budgets remained firm with no material cuts taking place. Actually, we saw further acceleration in client demands when it comes to AI-enabled products and services, particularly in three areas. First, in connected media, which is booming at high single-digit growth thanks to our ability to connect paid media with commerce and influencer. Second, in our AI production platform, which is growing double digits on the strength of demand for personalized content. Third, in building agentic networks for clients who can no longer afford to have fragmented agent strategy and need to break down the silo within their own organization.
This is why Publicis Sapient is positive again this quarter. This gave us the confidence to raise our forecast. Looking at our improved guidance in a bit more detail, the lower end at plus 5% is rock solid. It implies delivering in H2 the same underlying high growth rate as in H1 after adjusting for the 70 basis point tougher comparable. The upper end at plus 5.5% will demonstrate an underlying acceleration versus H1, including a very strong Q4 despite the high comparable. Clearly, the 5.5% is what we are aiming for, achieving this net organic growth in 2025 on the top of a five-year CAGR above 5% and widening the gap with our holding company peers. It comes down to one main reason, our early and sustained focus on implementing our AI strategy at the heart of our unique capabilities in data and technology.
This has translated into material market share gain and stronger client relationship. I will come back to this in more detail later, but if there is one thing I would like you to take away from this morning call, it is that we are winning today thanks to AI. Moving on to our third highlight, we are already in a favorable position of working towards next year thanks to our unparalleled net new business momentum we have had this year. As such, we expect to outperform again in 2026 for the seventh consecutive year. This confidence is built on our unique positioning, which has enabled our record new business performance in the first half and again in Q3.
As shown by the latest JP Morgan data on billings, in the first nine months of 2025, net new billings reached $6 billion, close to what we achieved for the full year in 2024. These wins will now create a solid foundation for our growth as we head into 2025. You may be getting used to our performance. After six years of delivering above market goals, we plan to outperform again in 2026, building on a multi-year high comparable exceeding 5%. While our main peers will benefit from their very easy comparable of 2025. I will now hand over to Loris for a deep dive into our numbers. I will then come back to explain why we are uniquely positioned to continue to win thanks to AI in this rapidly changing environment.
Thank you Arthur and good morning everyone. Let me go into the details of our Q3 net revenue. In Q3 2025, net revenue was €3.529 billion, up 3.1% on a reported basis. This includes a net negative impact of currency of 520 basis points, mostly due to the decrease of the USD and pound sterling versus euro, a contribution from acquisitions net of disposals of 260 basis points, mainly reflecting the revenue of Marseille Influential in 2024 and Atomic 212, BR Media, and Lotame in 2025. Finally, plus 5.7% organic growth, which comes on top of 5.8% organic growth in Q3 2024. Let's move to the next slide, which shows our Q3 net revenue by region. North America accelerated in Q3, up 3.6%, including plus 7.1% organic growth. There was a negative impact of the USD versus euro, mitigating the contribution of acquisitions.
Europe posted plus 2.2% reported growth, including 2.8% inorganic growth. There was also a negative impact of the pound sterling versus euro. Asia Pacific posted plus 6.5% organic growth, fueled by Greater China at 6.1%. The reported growth was 2.9%, impacted negatively by exchange rates. Middle East and Africa also faced a high comparable and was down minus 3% in organic terms. Latin America continued to perform very well with plus 9.6% organic growth. Let's get into more details for each region, starting with North America. In the U.S., the group's largest geography, which represents circa 60% of our net revenues, we delivered a strong 7.1% organic growth. Connected media accelerated to grow high single digit and intelligent creativity was up mid single digit. Publicis Sapient posted a low single digit organic growth with continued wait and see attitude from clients.
Let's turn to the performance in Europe on the next slide. Europe recorded plus 2.8% organic growth in Q3. The UK, which represents 9% of group net revenues, was up 10.7%. Connected media and intelligent creativity combined were up double digit, driven by strong new business wins and scope expansion, while Publicis Sapient grew high single digits thanks to positive phasing on some large clients. France, which represents 5% of group net revenue, was materially impacted by the comparable of the Paris Olympics last year. In addition, Publicis Sapient continues to be affected by some CapEx delays. As a result, France declined 8.6% organically. Germany, which represents 3% of our net revenue, posted a 5.3% organic decline. Excluding Publicis Sapient, organic growth was positive at low single digits.
Lastly, our operations in Central and Eastern Europe continued to grow very strongly, posting a 9.5% organic growth fueled by global new business wins. Turning to the next slide for our performance in the rest of the world, Asia Pacific, which represents 9% of group net revenues, delivered plus 6.5% organic growth driven by connected media activities that were up double digit greater. China remained very strong, delivering 6.1% organic growth in Q3 as we continue winning market shares. Middle East and Africa posted a 3% organic decline as it faced a very tough comparable on Publicis Sapient. Latin America posted plus 9.6% organic growth thanks to the strong performance in Argentina, Mexico, and Chile, all growing double digits. Growth in Argentina partly benefited from inflation. On the next slide, you will find the group's performance by client industry.
For Q3, 9 sectors out of 10 posted positive growth, and as we indicated before, we are seeing a well-balanced growth among sectors this year. The financial sector was up double digit, accelerating versus 2024 thanks to new business wins. Food and beverage was up 19% thanks to new business wins and scope expansions. Health care remained strong at plus 8% in line with expectation and thanks to scope expansions with a number of existing clients. The TMT sector was up 5% against a tough comparable of plus 9% last year. Moving to my last slide, Net Financial Debt. Average net debt for the last 12 months is €957 million, up €551 million versus at the end of September 2024. This reflects the impact of acquisitions completed since Q3 2024.
Net debt at the end of September was €1.6 billion, up €2.4 billion in the first nine months of the year. The increase is due to the usual change in working capital outflow as well as the impact of acquisitions and lower USD on our cash balance, all partly offset by free cash flow generation. Acquisitions, including earnouts, amounted to €916 million in the first nine months of 2025. This concludes my financial presentation and I now give the floor back to you.
Artier.
Thank you, Loris. Since the emergence of Gen AI three years ago, a lot has been said about its impact on our industry. When it comes to Publicis, let's be clear: today we are winning thanks to AI. This is visible in our industry outperformance in Q3 and in our guidance upgrade. It is mainly due to our €12 billion investment in data, technology, and AI over the last decade. We acquired Epsilon, but also Retargetly and Lotame, to lead in identity resolution, which is absolutely necessary to truly deliver impact with AI. Today, we are enabling our clients to directly engage with 91% of adults connected to the Internet globally.
We have uniquely connected this identity backbone to our existing media capability while massively expanding into high growth media channels such as retail media with CitrusAd powered by Epsilon and Profitero, commerce with Mars United Commerce, and influencer marketing with Influential and Captiv8 to maximize our clients' investments. Finally, we expanded our technology and engineering offering with Publicis Sapient and also targeted acquisitions like Praxia, Cora, or Spineaker to help our clients modernize their tech infrastructures and drive their broader digital transformation while investing in new capabilities. We have also built an AI-powered native platform, actually several AI-native platforms, for both our people and our clients. We started in 2018 with the launch of Marcel, designed to connect talent and foster collaboration across the group. Two years ago, we introduced Core AI, which has powered every single pitch we have won this year.
More recently, we developed Leona, our end-to-end production platform for data-like content creation, personalization, and measurement at scale. On the Sapient side, we created Budi, an enterprise-grade agentic AI system, and SixShot, a platform that automates and simplifies software development and coding. In total, we have dedicated €1 billion in OpEx over the past seven years on these AI platforms. These efforts have completely transformed our model and revenue mix, embedding AI into every part of our business. Today, 80% of connected media, which represents 60% of our revenue, is powered by AI. For intelligent creativity, which represents 25% of our revenue, one third comes from our fully AI-enabled production platform that is growing double digits within Sapient. AI is at the core of everything we do, positioning us for renewed growth as soon as client CapEx spending resumes.
This AI-powered revenue mix fits perfectly with our client needs and allows us to lose less and win more. Our clients are growing and staying with us longer. Retention among our top 100 clients has remained above 98% for the past five years, while average revenue with our top 200 clients has grown by nearly 50% over the same period. At the same time, we are gaining significant market share by consistently topping new business rankings for the past six years as reported by JP Morgan. As a result, we have extracted ourselves from the pack and established a category of one as demonstrated by our performance when compared to both our direct peers and also the IT consultancies.
In the first half of the year at constant currency, our 3-year net revenue CAGR reached 7.3% versus negative growth for our holding company competitors and just 3.3% for the average of the other IT consulting groups. The more demand for AI grows, the wider the gap with competition becomes. It was 430 basis points versus our three main holding company peers in 2024. It is expected to exceed 600 basis points this year. Looking ahead, our start in AI gives us a unique opportunity to accelerate even further. First, it will make us even more.
Indispensable as a key transformation partner to our clients.
They are currently facing a marketing landscape that is more fragmented and complex than ever, where tech giants are spending billions on new AI technologies and infrastructure, multiplying the number of platforms and channels and making it harder to reach and engage with audiences. As a result, none of our top clients allocate more than 4% of their total marketing spend to a single platform. In fact, across our top 20 clients, the average spend on their largest platform is just 2%. In this context, our role as a trusted neutral partner able to deliver consistent cross-platform messages, optimize their budget, and maximize return on investment with full transparency has never been more important.
It allows us to carve out a wide space for ourselves by serving as the connective tissue for our clients, technology, data, and agents, creating the AI-powered marketing solution that they really need to win in the future. AI is also a way for us to continue to increase our addressable market. By using AI to integrate new capabilities into our data and tech backbone, we are developing new sources of growth. A clear example is our influencer business, which is materially accretive to our growth. By using AI to connect Epsilon data with Captivate technology and influential creative network, we have built the world's largest and most powerful influencer media platform, enabling our clients to deliver the same reach that they can get at the Super Bowl for only a fraction of the cost.
Another example is what we are doing in sports with the acquisition of Adopt and, more recently, Bespoke Publicity. Sports is innovating in the category by leveraging, thanks to AI, the scale of our connected media operation and Epsilon identity to uniquely enable clients to plan, execute, and measure across every channel from sponsorship to paid media to social. Last but not least, we are building the next generation of AI-empowered health and medical communication, integrating Core AI with capabilities like P Value acquired this summer to deliver enhanced scientific storytelling and faster speed to market. Thanks to intelligent content generation, targeted audience segmentation, and data-driven audience engagement, AI is not only accelerating our current and future growth, it will also help us generate further operating leverage. In addition to investing in our proprietary AI-native platform, we are looking at every opportunity to automate labor-intensive tasks thanks to AI.
This includes implementing agentic solutions at the core of our operations. In fact, we have started with our back office processes. Combining our unique platform organization, our services backbone, and the deployment of agents, we will bring greater elasticity to our cost base. Although it is early days, we are confident that this Agentix solution will help us generate margin improvement beyond 2025 while allowing us to invest, including in training and upskilling of our talent to be AI fluent. Voila. Today, while many are asking how AI will impact our industry, we have already embedded it into all of our operations, making our revenue mix AI-enabled and perfectly adapted to our client needs. This is the main reason why we are not only outperforming our peers and the IT consultancies, but we are also increasing the gap in Q3 with a very strong quarter.
Looking ahead, as we don't anticipate slowdown in our client marketing investments, we are now in position to raise our 2020. At the same time, our continued new business momentum means we are looking ahead to 2026 with clarity and confidence. I would like to thank our clients for their trust and our team for their hard work and dedication. Thank you all for listening. Now, with yours, we are ready to take all of your questions.
Thank you, sir. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and 1 on their touchtone telephone. To remove yourself from the question queue, please press Star and 2. Please pick up the receiver when asking questions. The first question comes from Laura Metaller of Morgan Stanley.
Bonjour Arthur and Loris. Three questions for me please. The first one is on working capital. I've heard that Publicis may be using their working cap by offering attractive payment terms for customers to win new businesses. Could you please share your view on this? Also, what do you expect change in working capital to be for 2025? Second question on the creative business, which is growing very strongly. Can you help us understand what is the key value add of Publicis in this business? Can you talk about the production platform that you mentioned? What does it do that the video and image generation tools cannot offer? Lastly, you mentioned implementation of AI tools internally will help expand margins beyond 2025. How confident are you that clients will not ask you to share some of your savings with them? Thank you.
Thank you, Laura. Actually, for Q3 there are a lot of questions for Loris already, so that's a good thing. If you don't mind, I'm going to take it in another order. I want to start with the creative business. Then I'll say on new business, then I pass on to Loris for the working cap, and we'll finish on.
The AI tools like this. Hopefully, we cover everything.
Let's start with the creative business.
We are very satisfied with our performance. I mean, mid single digit in a capability that is mainly declining for our peers is great news.
I think there are a couple of points that are important for you to.
Take out of that.
First, our creative business only represents 25% of our mix. In the presentation we insisted a lot about our revenue mix because it's very favorable to growth as you have seen. Also, it represents only 25%, it is actually growing and there are two reasons why it is growing. First, when you take the 25%, you have 8% of those 25 that are a production platform. This is growing double digits, where we are basically making the demonstration that you can grow with content production thanks to.
AI in a company like ours.
Why, it's pretty simple, is that honestly.
Today everyone can deliver cheaper, faster, and better content.
Laura, you can do it.
Basement with basically ChatGPT if you want.
What makes it very difficult is to make this content what we call intelligent, meaning connected to the data and allowing you for every piece of content that you push to a client to know if it's working or not. Basically, this is where we're winning, is that not only we deliver better.
Faster and cheaper content on AI.
Platform, but we're able to connect it to our data to make it work.
Harder in terms of business outcome for our clients.
Part of the 25% are the 8% in production, growing double digits. The rest is what we call storytelling. The truth is this is an area where we are growing honestly, because today we are winning market share. We are basically winning pitches, and by winning pitches, we are also increasing our pie here versus competition. What I think is very reassuring for any investor here is that a third of our creative business is already 100% AI empowered, and for the rest is winning market share and getting transformed. I'll say a word about the pitch activity, and thank you so much for asking the question on the working cap because this is something that we are hearing from some and this has definitely—there is Nico. Hello.
Hello.
Give me a second.
Yes, we can hear you. Thank you.
No, I heard you until you said you're hearing from, and then it.
Yeah, we have a connection issue.
Maybe I'll try another mic. Give me a second. I'm going to try another.
Another mic. Do you hear me better now? Yes, hello.
Yeah, we can hear you.
You hear me well?
Yes.
Okay, I've got a problem because I'm hearing myself too. We're going to try something. Give me a second. Maybe we can cut the sound here.
You would see what we are doing in the room.
We are playing with the mic and trying to fix that live. Okay, I think it's good now.
You hear me well?
Yes.
No, you don't hear me anymore?
Yes, sir, we hear you loud and clear.
Great. I'm going to assume you're hearing me, and if you don't, raise your hand or whatever you want. I have asked in the room that we don't use our mobile during the call, so we're not going to be. We're good.
We can start.
We can go again. Okay, great. Laura, I don't know exactly why I stopped on the pitch question.
I'm going to take it from the beginning. What I was saying is we're going.
To give you all the detail about.
The working cap and how we are winning today. As I was saying, I'm very happy you asked the question because we have heard from some investor that actually some very desperate player in our industry was claiming against that. I think it is good we can answer that. What I was saying is that.
As you would recall, we had an.
Historically high H1 when it comes to new business.
What we said in Q2 is it's still too early to know exactly what would be the momentum for the.
Second part of the year.
I would say that the good news.
We had material wins when it.
it comes to Q3, basically this is one of the reasons, if not the.
Main reason why we now feeling confident and with more clarity when it comes to 2026.
I would say that what is really remarkable about the win we are having at the moment is that we.
Are starting to win new business without a pitch process, meaning we are able to convince clients.
By the way, if you look.
This is public information. As you know, we don't give any name anymore on your business. This is public information.
We have been able to convince very.
Big brands with material accounts to move to Publicis without a pitch for a very single reason, which is AI allows us to differentiate even more and leverage our capabilities in a unique way. This means that when clients come to a moment to choose a partner, they.
Are arbitrating between the words that can.
Truly help them with material business impact today thanks to AI and the one.
Maybe one day we'll be able to do it, as they need the result immediately.
We have seen a couple of pitches that have been stopped, and the business going to us.
To answer your question, I want.
To be straightforward before I give to Loris.
We continue to win pitches for a while now, but we are keeping a.
Very disciplined approach and staying away from.
The pitches that are only one surprise.
You have seen a couple of examples in the last quarter.
To be even more straightforward, the best proof that we are not buying market share is that we have been number one in new business basically for the last six years while increasing our.
Financial ratios in the same time.
I invite you to look at our.
Track record since 2020. Roughly number one in the business almost every year, if not every year.
are increasing all of our financial KPIs, starting with the margin. By the way, before I give.
To Loris, this is something that you can't say about our competitors. If you look at our competitors, particularly.
Last year, they had a very good.
Track record in new business. That is not translated into the number today. Maybe we can be more specific about the working cap, and then you can go to the last question.
We have one mic for two now, so I've got to share the mic.
Give me a second.
I'm giving it back to Loris.
Hi, Laura, hopefully you can hear me well. Let's be very clear, just like we are never winning on price, we are not winning on payment terms. Of course, pitches are by nature very competitive, including on payment terms, but we always look at this in a very measured manner. Now, when it comes to working capital, as we said at the beginning of the year, we should be around neutrality for the full year. We are very disciplined on managing it, including both vendor and client terms. In fact, in Q3, even though we don't provide cash flow information, we saw a meaningful improvement in our working capital. As we said before, given the high seasonality of our working capital, the sensitivity at the end of the period, cutoffs and the overall magnitude of the daily flows, our focus is much more on average net debt.
Just to remind you, we are aiming to close to €1.1 million in average net debt in 2025. The increase of roughly €100 million versus our previous guidance results from further depreciation of the USD versus euro, which, as you know, is impacting our cash balance.
By the way, Laura, I think the kind of comments you are having on the background when it comes to new business is not helping our industry and is undermining the intelligence of our clients. If you really believe that big clients are investing a lot of money with their partner and will take a decision on a pitch on pricing, you're wrong. It's mainly the case that they choose the strategic partner. Let me be clear, with aggressive pricing strategy that we all have, at the end of the day you never win a big pitch except for a couple of clients that again win on pitch on price. You win on strategy, you win on capabilities, you win on talent, and then you qualify on prices for sure.
Yes.
The next call, sir, is from Nicola Langley of BNP Paribas Exane. Hello.
Good morning, everyone.
Thanks for taking the question. I've got three, please. First on GenAI. You have mentioned the increased demand for GenAI services and products. Can you tell us a bit more about the type of services clients are particularly interested in? Do you think those services are a net addition to your traditional services, or are they mostly replacing them? Secondly, on Sapient, it appears the trend was a bit better than expected. Are you seeing signs of recovery, or do you think it's still too soon to say? Third, on M&A, I think you said you are now above $900 million spent year to date. Do you expect any additional deals by the end of the year? Looking ahead, do you plan to maintain that $800 to $900 million M&A envelope for bolt-on in 2026?
Thank you very much, Nicolas.
I realize this was the problem.
Microphone, which did not answer the third.
Question of Laura about AI tools for efficiency. We'll come back on that after we answer. Nicolas, with you Loris?
Yeah.
Okay, so I'll start with the GenAI question, which is a great one. Yes. I mean if there are two things you need to take out of that call I guess is first, we haven't seen any slowdown in client demand in general, no cuts, and more importantly we are definitely seeing a boom when it comes to AI-enabled products and services. I think what is interesting coming back.
To your question, Nicola, is that after.
Our client has spent a lot of time trying agents with different partners, different hyperscaler, and trying to see what was the proof of concept that could work. They realized that by doing small things on parallel topics, we're not having any impact and any business impact directly. I don't know if you have seen the MIT studies that show that basically 95% of the book are actually failing. I think the reason why things are changing now is that after a couple of years again experimenting AI, clients are realizing that they need to put AI.
At the core of what they do.
They need to do it in a way that can deliver today material business impact. This is what we are doing with them. This is why, by the way.
We see such a boom, particularly in.
Connected media and particularly in the U.S. where our model is the most advanced. If I take a couple of quick examples to tell you the kind of things that we are doing today that are again increasing our growth pretty significantly and again creating a gap that is even major with our competitive. I will give you three. When you look first at connected media, one area where we are growing and more importantly make our clients grow is our ability thanks to AI to connect.
Paid media with commerce and influencer. To give you a concrete example, we are able today to spot someone.
Make sure that we advertise on the right influencer and lead them directly to commerce to any retailer website. I don't want to give any number here, but as you can imagine, this is the kind of thing that we could not do before because again, you need AI to connect those capabilities.
Never forget that AI is only data.
Talking to data and our ability to truly understand people better than anyone else with Epsilon, to link it to the biggest influencer network, and then link it.
To sales directly is the kind of.
Thing where AI is immediately leveraging capabilities that will drive business outcome.
A second area where we talk very.
Fast is on production.
As I said, I allow.
Everyone to deliver cheaper, better, and faster content. The question is how AI allow you to measure performance of this content.
Make sure that you can correct or.
Eliminate or accelerate depending on the business outcome. For this you need the data, which we have with Epsilon, and you need the AI to connect it to the capabilities last. This will deserve more time and maybe give me an opportunity to.
Jump onto the Sapient question is agents.
What we have experienced with agents in the last year is clients trying to.
Put agents almost everywhere and trying to.
See how it could work in a very fragmented way. What they realize now is that they need to connect all of these agents. Here, thanks to Publicis Sapient, we have a fantastic solution which is really an agentic network called Budi that allows us to truly help our clients transform.
Bringing all of those agents together powered by data.
When it comes to marketing, adding our capabilities. For example, making sure that we move from a legacy IT system to a modern IT system, doing it for 50% to 30% less than some of our competitors, these again, hopefully I'm clear I'm putting you a bit in the kitchen, are concrete, tangible examples of expertise that we have, and only we have, that we can put at the service of our client and deliver immediate business outcome.
I'm going to pass on to Loris Nold.
To say a word about M&A.
I will come back to Publicis Sapient.
As you said, Nicolas, we have reached the targeted envelope that we set for ourselves of €900 million for the year, including earnouts by the way, and we don't expect anything material until the end of the year. When it comes to 2026, it's too early to give you some guidance on the M&A envelope, but what I can tell you is that the pipeline remains very active and that we will continue to double down on our bolt-on strategy, focusing on very specific capabilities, be it in identity resolution, data management, new media channels, production, and specifically the technology associated with it and business transformation. We want to remain also very cautious, and we will continue maintaining a very strict financial discipline when it comes to acquisitions going into 2026.
Just to finish on that. We went fast into the presentation. What is starting to be very powerful with our M&A activity is that not only it fits exactly with what our clients want, but by connecting new expertise to our data and technology, we are truly opening new addressable markets for us, which is very encouraging because on one side we are gaining market share on our direct competitors, on the other we are opening new addressable markets. Influencer is a great example of that. By building the biggest and the most accurate influencer media network, we are able to generate new kind of revenue that we didn't have. In the future we're going to do exactly the same thing with sports as we believe that again adding our capabilities to our data, we're going to make.
Sports addressable, which is not today.
There is a lot to do in the health sector at the moment. As you know, things are changing in terms of regulation.
Every time we do a bolt-on acquisition.
On acquisition, we think about is this right for our clients, is this fitting with our existing expertise? Is it opening a new market for us and increasing our addressable market? This definitely is the case.
If I come back to Publicis Sapient, I mean honestly, there is a paradox.
At the moment in this so-called system integrator industry that Publicis Sapient belongs to.
On the one hand, if you look.
In the last two years, I would say almost the last three years, the macroeconomic challenges have forced clients to pause on their CapEx spend. You know that very well and you see it as evidence, whether it be in all the results of the IT consultancies. On the other hand, this is why we are starting to see the beginning of this momentum at Publicis Sapient, as the very same clients, the ones that have paused their CapEx, know that they will need to accelerate in their transformation.
Exactly for the reason I gave you before, which is okay, it's great to do some experiments, but at one point.
You need to have a cohesive strategy, and you need to go big on that.
For the time being, this.
Has mostly materialized into an increasing demand on AI consulting project.
It's really by consulting project.
That today Publicis Sapient is returning in positive.
Territory, not to CapEx, but to this opportunity with many, many clients to show them the way for them to understand the roadmap looking ahead.
This is important, we want to.
Remain cautious as we don't know how.
long this macro induced wait and see attitude will last.
To be very clear, when clients.
Resume spending in CapEx and they will.
We think that Publicis Sapient is very well positioned to take actually a disproportionate share of these opportunities.
This is for two reasons.
First of all, they really have built.
Over time, leading enterprise-grade agentic AI solution and platform. We talked about it a bit in our presentation with Budi and SixShot. Second, and I think this is.
A very important point for you guys, its revenue mix is 100% on business.
Transformation where clients will focus their investment.
They have no particular activity on outsourcing that will be totally replaced with agents. We have to be cautious.
Because it's early days, it's great to see the momentum we are having with strategic project. No doubt that clients will need people like Publicis Sapient to make sure that they have an AI strategy that truly delivers business outcome. We are very confident that the.
They will resume on CapEx.
Will see an acceleration.
Do you want to take Laura's question?
Yeah, the question on efficiency generated and then maybe, maybe to take a bit of a step back. You know, we continue to generate operating leverage through four key sources. The first one is what you know, our platform organization, our country model, and obviously our cost discipline. Also importantly, through productivity improvement thanks to automation, including with agentic AI solution. It's definitely early days and far too early to quantify the extent of those savings that we will be able to generate. Just to give you maybe a bit more color, first, we have been automating a number of, I would say, labor intensive back office tasks. Arthur Sadoun said thanks to Core AI solution. Second, we are also looking where we can progressively deploy agents with two objectives in mind: work faster and be more productive.
Keep in mind also that more than 50% of our AI investments go into upskilling and retooling our talent. That helps them move away from manual tasks and focus on high value services where we will continue to need them actually the most.
Thank you. Laura, I hope we answered your last question now.
The next question is from Adrien Nussenbaum of Bank of America.
Thank you very much for taking the questions, please. The first one, can you talk about the tailwind that you expect from all those new business gains in 2026 versus what you had in 2025? I think 2025 is a bit more than 200 basis points. Secondly, I noticed that your two largest markets, US and UK, are growing 7% and I think you said that these markets are indeed where your strategy is the most advanced. Do you think these markets are good leading indicators for maybe the rest of the group? Finally, on this operating margin points on the unlock so far, you've raised your organic growth twice in 2025 and yet the margin guidance has been unchanged. I know 2025 is an investment year, but are you signaling that we should see stronger operating leverage in future years through that comment?
Thank you.
Thank you very much.
I'll start with the new business. Basically, tailwind this year has been totally basis point plus, and we expect to be roughly the same for next year. I think what is very interesting in those numbers is not that much the 200 basis point, but actually the 300 basis points of clients that we are retaining and growing. I think there were a couple of numbers in the presentation that were very important: 98% retention rate over the last five years, growing our client over this period by 50%. This, I think, is what again should give you confidence about the fact that our model is now working at full speed because we are creating a stickiness and an ability to grow with our clients, which is one of the most important things. It comes to your second point about the U.S. and UK.
They are definitely the most advanced in terms of capabilities. I don't know if we can say that they are a leading indicator because, of course, it's too early to see how the rest will develop. What I can tell you for sure is that in the UK and the U.S., we are definitely making the demonstration of the upside we can create in terms of goals. Never forget that the 5% that we're going to deliver this year is in a very challenging context. Let's be clear, it's not more challenging than it was a couple of quarters ago, but it's still very challenging with a couple of engines that are not firing up at all cylinders. What you should take out of that, I guess, is that in difficult times we're able to deliver five thanks to our model, and in good times, hopefully we can deliver more.
I think a good benchmark of that was actually 2022, not 2021, because 2021, you know, the comparable was so easy from 2020 that it was difficult to say. In 2022, a year where we stabilized again as an economy and where.
The trend was good, we were able.
To deliver double digits. I'm not assuming that we're going to deliver double digit tomorrow. What I can tell you is that UK and the U.S. are definitely showing the way.
By the way, I will put China.
Into the same bag, and I think the Chinese model is very interesting, particularly when you compare to competition. For sure, we have a couple of sources of growth that make us very confident. Number one, as we said, is this revenue mix that is actually over indexed on growing segments and, of course, accelerating. The second is new business where we see opportunity to gain share. The third is what I talk about, addressable market and our ability to make some acquisitions that make us win tomorrow.
Last but not least, all of.
These in a competitive landscape that is reducing massively, I would say by 25% at least and already anticipated by our clients. I will let you say a word on the margin.
Just a few points on that. I mean you will remember that in H1 we delivered 17.4% operating margin, which was 560 basis points above the peer group. When you take into account restructuring charges as we do, we continue to guide towards a slight improvement. This is despite an acceleration of our investment when it comes, as I said earlier, to AI upskilling. We're continuing to accelerate on talent upgrades, new business ramp up obviously, and you know, the largest bonus pool of the industry this year again. We are investing significantly behind the business but will deliver continuing margin improvement.
If I can build on.
This question, as we said, we have the vast majority of our business that is AI-enabled today. We are growing and delivering a very strong margin at the same time, outperforming our peers even more every quarter at the moment. You need to know that has a cost. By the way, this is one of the big reasons our clients today are being cautious on spending. You can make all the plans you want if you really want to implement AI. It has a big cost in terms of CapEx and also in terms of OpEx and the investment that Publicis Groupe is doing today to make sure that we continue to lead the way there. We start to make sure that we find some operating leverage also in our capabilities and in our operation as a cost.
The fact that we are able to mitigate and cancel this cost and continue to improve margin despite this investment.
Is a big thing.
Same thing on talent. I mean we are over investing in talent. Loris said it, I think we are the only one that is paying the bonus as we do today. We are continuing to hire, to increase and we are making sure that we are of course more efficient every day that we find solutions, send to agents to continue to find some leverage. We will. I think that what you should take out of that is that while we are making significant investment in AI and in talent and by the way, in training business, we are at the moment, we are still able to give an improvement on our margin.
Thank you.
The next question is from Julien Roche of Barclays.
Yes, good morning everybody.
Three questions. The first one is on Publicis Sapient.
It went from slight growth in Q2 to positive in Q3. Can we get the actual organic growth rate in both quarters?
Because slight growth versus positive seems the same to me.
Number two, creative went from mid single digit in Q2 to low single.
Any reason for that?
Lastly, on production, how much of the 8% is 100% AI?
That is, you produce ads with AI.
Internally as opposed to use a physical production company, either internal or external, because I would think it's not 100%.
Merci.
Thank you. I'll start with the last one and then I pass on Loris. Almost 100% of what we produce is produced with AI. What the market doesn't get is that most of what was produced more traditionally was produced by third parties so far. This is also a reason why you are seeing some growth, as now we're able to start producing in-house some AI things that before were produced outside. It's particularly true, for example, for automotive. I will let Loris answer one and two.
Just on the Sapient numbers question. Julien, you remember that in H1 we posted -2%. In Q3 we're at +1%, fairly balanced between US and international. When we are looking at H2 we are expecting an improvement versus H1. That's on Sapient. On the question of creative, there's a couple of reasons. First, it's both mid single digit and so there's no great differences from one quarter to another. Second, there is a higher comparable when it comes to Q3, obviously 2024.
Compared to this year. Merci.
Merci.
The next question is from Jerome Bodin of ODDO.
Yes, good morning. A few questions for me. To start, I do have a question on AI. Of course, you will not learn anything with me, but AI is definitely the number one reason for the low valuation of the industry at the moment. It seems to me that one of the reasons is that the mapping of AI is a bit unclear. Nobody really knows where the main competition will come from. We all know that there is a strong competitive pressure to come, but from where it's a bit unclear, which leads to recurring fears and a bit of fantasy. My question is, can you name, according to you, this competition? I'm not asking for a corporate name, but more a type of player. Is it IT startups, big tech, mid-sized agencies, internalization, according to you? That's my first question.
The second one is for Loris on the dollar. If the decline of the dollar becomes more structural, could you change your hedging strategy both on the P&L and the balance sheet? Could you be a bit more active on that front? Lastly, Arthur, you said that you have won more businesses with no pitches. Do you see it as more structural? If that's the case, could it have a material impact on the margin?
Thank you.
Thank you very much.
I'm going to take one and three and leave you two, if you don't mind. Yes, I mean if your assumption is that is leading to low valuation for our industry, I can tell you, and hopefully we made the demonstration today that AI is the reason why we are growing faster and actually increasing the gap with competition now. It goes into your second question about the competition. I think that again, it's a journey we started more than 10 years ago under the vision of Maurice, which is to say if we want to win in the future, we need technology and data. At the time, as you would remember, it was very, very challenged.
The truth is, the reason why we are winning today and the reason why we believe we are a category of one is that we made the investment in data and technology that allow us to leverage AI and create a massive competitive advantage at the moment. That comes back to your question, where clients are arbitrating. I guess one of the things that the market is not understanding is all of those hyperscalers, all of those platforms are essential partners to our clients, but none of them play more than 4% of their mix. What client needs at the moment is partner that can truly help them connect all of those capabilities for the sake of more efficiencies in media, for the sakes of brand value that stay strong, for the sake of transparent measurement. They're going to need this kind of connective tissue partner that can do that.
The reason why again, we are.
Growing so much at the moment is that the more complex and the more tech the network, the landscape is, the more opportunity it represents for us. What is our competition tomorrow?
It is the one that will be able, as we do, to connect all.
Of these ecosystem being trusted by our clients and have the capabilities to leverage every of those platforms in the best way.
Honestly, I can't tell you one player.
Today that is having at the same.
Time the capabilities, the model, the people.
The trust of the client to do it.
This is why, by the way.
We are pretty confident for next year because we see this trend increasing now.
This leads to your question about no pitch. Hopefully, it's a trend. I'm not sure.
Let's be clear. I think that some clients know exactly what they want, and so we can come to an agreement pretty fast. Others still want to see what happens on the market, which is again totally comprehensible. I think the shift on mindset.
Says a lot, and the shift we.
Have operated at Publicis Groupe is to truly move from a communication group to truly be at the heart of our client transformation. Being able to build this tech infrastructure that they all need to leverage AI thanks to Publicis Sapient, putting at the core of their model the best identity of the industry to make sure that they know their client and their prospect better than anyone else. Creating this agent network layer on the.
Top of that, to activate media too.
Deliver personalized content and to measure is a place where today we have a unique position. I will say, and I'll stop there before I pass to Loris. There is something that I guess Jerome should never forget is that on the top of that we have the trust of our clients. In a world that is getting increasingly complex, when you have the capabilities, the model and the people and the trust, you can grow significantly, actually more than our peers and more in the IT consultancies and continue to outperform the market as we're expecting for next year.
Hi Jerome. On the question on the USD or the FX, just to start with our guidance for the year, we're looking at a $500 million impact. That's based on an exchange rate of 1.17 to 1.18. I mean, it's moved a little bit in the last few days as you know. Keep in mind that our largest operation by far is in the U.S., and also that it's partly mitigated by the fact that our costs, they are obviously in USD, and so it's a bit of a natural hedge between the revenue and cost and assets and debt. Given the size of our operations in the U.S., that would not have a big impact or will have a big cost.
Obviously, going beyond that.
All right.
It seems that there is no more question.
Right, yeah.
Maybe I'll do a quick wrap up. The first thing that I hope you're taking out of our presentation is we don't see any slowdown in our client spend, which is of course good news, and that's the opposite and we discussed a lot about that. Thank you for your question. We see a booming demand for AI-enabled capabilities and now it's serious, it's about delivering business outcome and in our case it creates three big opportunities that have materialized this quarter and will continue to materialize. One is in connected media thanks to our ability to connect paid media with commerce influencer free.
We talked about that.
The second is definitely an AI-led production platform due to the increasing demand of our clients for personalization. I think this is a very important point for you guys because you can see a lot of people offering this kind of service. The question is, is it connected to the data in order to make sure that it delivers business outcome? Last but not least, it translated into Sapient, a number agentic network that can help our clients basically desiloed their organization. We don't want to talk about the promise of AI. We wanted to show you today that AI is real at Publicis Groupe today, and it is the reason why we are growing. Now if I have to sum.
It does it for a very simple reason, it allows us to differentiate why clients are arbitrating between.
Partners that can help them in this very complex world and the one that can't.
The best proof of that are.
Definitely our number, of course, our Q3 number.
Even more importantly, the gap we.
are creating in Q3 versus our competition. Last year it was 350 basis points. When you look at our main three competitors this year, it's 700 basis points. We are increasing the gap because we are increasing the differentiation.
We are able to raise the guidance.
Because now we are confident that this demand will continue. Again, we are starting to gain clarity and confidence for next year, and we feel that we're going to be able again to outperform our industry for the seventh year in a row despite tougher comparable every time, particularly versus peers that might have lower numbers. Thank you very much. I know that Jean-Michel Bonamy is here to take all of your questions offline now, and see you very soon. Merci beaucoup.
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